• A company processes orders that are placed in multiple countries.

  • Calculate country taxes.

• Some countries may use:

  • A simple calculation
  • A fixed percentage

• Other countries user:

  • A sophisticated formula

  • Requires additional information

    • Product classification
    • Vendor location
    • Buyer location
    • Etc.

Propose a model (class model) that:

• Can be used to calculate taxes for multiple countries
• Can be escalated easily.

NOTICE: made up objects may be included.

Proposed model can be seen on image below. Also, sample classes are under the php-model subfolder on this project.

The Tax Factory will take care of receiving order information and making the correct tax calculation based on the different variables such as vendor/buyer location and/or product classification.

TaxFactory.calculate({
  OrderNumber: '123',
  OrderAmount: 345.8,
  OrderDate: '2016-11-11',
  VendorAddress: {
          Line1: '2340 5th Avenue',
          City: 'New York',
          State: 'NY',
          PostalCode: '10118',
          Country: 'US'
          },
  BuyerAddress: {
          line1: '300S Orange Ave',
          city: 'Orlando',
          state: 'NY',
          postalCode: '32800',
          country: 'US'
          },
  OrderItems: [
        {
          Id: 1,
          Quantity: 1,
          UnitPrice: 45.2,
          ProductTaxType: 'Food'
        },
        {
          Id: 2,
          Quantity: 1,
          UnitPrice: 300.6,
          ProductTaxType: 'Drugs'
        }
  ]
});

{
  OrderNumber: '123',
  OrderAmount: 345.8,
  TaxFixedRate: 0.075,
  TaxAmount: 25.935
}

{
  OrderNumber: '123',
  OrderAmount: 345.8,
  TaxFixedRate: 0,
  TaxAmount: 26.308,
  OrderItems: [
        {
          Id: 1,
          ProductTaxType: 'Food'
          TaxRate: 0.05,
          TaxAmount: 2.26
        },
        {
          Id: 2,
          ProductTaxType: 'Drugs'
          TaxRate: 0.08,
          TaxAmount: 24.048
        }
  ]
}

The usual approach on scalability for this type of situations (where tax information can be added at any time for additional countries) is to create "Resolvers". This way additional code is added and loaded dynamically as it seems necessary.

For example:

Checkout a "Tax Library" at: https://github.com/commerceguys/tax

However, I am going to take a different path. Here, scalability's been based on a data-driven approach.

A repository (which can be a database or, simply, a set of json/xml files) will hold detailed information on tax calculation for each country plus a combination of optional variables.

Classes on the table below represent the repository.

Additional Complexity

Complex calculations can be extended by simply adding rows with additional information about tax rates based on vendor location, buyer location, or product classification.

Also, additional variables can be added to the formula. For instance, if calculations must be extended at the State level (not only the Country) additional columns can be added to include State for Vendor and Buyer (as optional fields)

Now the model would hold tax rate information by:

• Vendor country
• Vendor country, buyer country
• Vendor country, vendor state, buyer country
• Vendor country, buyer country, buyer state
• Vendor country, vendor state, buyer country, buyer state
• Vendor/buyer country/state, product classification

Even More Complex!

Just to prove the point, the model above introduced extra variables to the tax calculation formula. I haven't talked about it just yet.

Certain countries support a different rate on special days of the year. For example, a Super Reduced tax rate on January 1st. If the system doesn't provide this functionality, somebody at the support team should be waiting to update tax information at midnight on New Year's Eve.

Looking at the class model above, the TaxRate class contains two extra fields:

• ValidFromDate
• ValidToDate

This will allow having a different tax rate for certain dates of the year without having support personnel around for it to happen.

• Vendor country always counts for tax calculation
• Tax fee is always a percentage (not a fixed amount) of the order/product monetary amount.
• For cases when a country is tax exempt, simply put zero to the TaxPercentage field.
• Product name is irrelevant for the tax calculation, and thus, it was not included on the TaxRequestOrderItem
• On cases on which both country taxes and state taxes apply, TaxPercentage will hold the sum of both percentages.